Singapore - Economic development

Photo by: NiNe

Technological change and political considerations in the post-World War
II period—not least of all the nationalism that accompanied the
quest for independence among the region's European
colonies—have combined to alter dramatically the economic
self-perception and public policies of this diminutive island-state. By
the late 1950s, it was obvious that prospects for economic growth would
be severely limited if Singapore remained bound by its old economic role
as
entrepôt
. The decision to industrialize—and to do so rapidly—was
deliberate policy. Initial emphasis in the government's economic
development program was upon employment. The increasing trend toward
economic self-sufficiency in neighboring Indonesia and
Malaysia—and the steady retreat of the UK from defense
responsibilities in the region as a whole (centered on its large
Singapore naval and air facilities)—prompted the government to
focus completely on finding alternative employment for the
island's highly skilled and disciplined workforce. By the end of
the 1960s, this problem was effectively solved, with Singapore boasting
one of the lowest unemployment rates in all of Asia.

Emphasis in the mid-1970s was on labor skills and technology, especially
as these were identified with such modern industries as machine tools,
petrochemicals, electronics, and other precision work. A high level of
participation by private foreign capital provided an important
cornerstone to this development. In 1979, the government abandoned its
earlier policy of stimulating low-wage industries and adopted a policy
of encouraging capital-intensive and technologically sophisticated
industries. Especially targeted for investment promotion in the 1980s
were computers, computer peripherals, electronic medical instruments,
automotive components, specialty chemicals and pharmaceuticals, and
optical and photocopying equipment. Following the recession of
1985–86, the government concentrated on developing new markets
and on turning Singapore into a manufacturing, financial, and
communications center for multinational corporations.

In the 1990s the economic development strategy emphasized both the
manufacturing and service sectors. The Economic Development Board (EDB),
formed in 1961, has guided Singapore's industrialization. Early
emphasis was placed on promoting investment in manufacturing. The
Strategic Economic Plan (SEP) announced in 1991 focused on education and
human resources to enhance export competitiveness. Emphasis on
developing the service sector has been supported and enhanced by the
Operational Headquarters (OHQ) program, encouraging companies to use
Singapore as regional headquarters or as a central distribution center.
The Creative Business Program promotes investment in the film, media,
and publishing, arts and entertainment, textile, fashion and design
sectors. Currently the EDB works toward Singapore's vision of its
future as a developed country through the promotion of business.
Singapore's globalization strategy hinges on making a
transformation from a production-driven economy to an innovation-driven
one. Other key elements of this strategy are the reversal of downward
trends in productivity, and sustaining foreign investment in
Singapore's capital investment. Singapore initiated the formation
of a growth-triangle, linking Johor, Malaysia, Singapore and
Indonesia's Riau province focusing on Batam Island. Singapore
benefits by tapping a supply of low-wage workers and offshore land to
sustain its more labor-intensive industries.

The Asian financial crisis was only a temporary setback for the healthy
economy of Singapore. Roadblocks to further economic development include
rising labor costs; which have threatened investment in
Singapore's industrial sector, causing the government to
implement strategies to cut costs and increase productivity. The rise of
Singapore's currency has also prompted the dispersion of new
industrial enterprises from the country, which the government has
answered by promoting the development of high-capital industries.

The collapse of the dot.com bubble in 2001 presented a more serious
challenge, particularly as subsequent events—the 11 September
2001 terrorist attacks on the United States and global uncertainties
attending the confrontation with Iraq—have resulted in continued
low export demand. As of 2003, the Singapore economy was set to register
its second year of positive growth, although at the less than robust
rate of 4.8%. At this point the government has not made any fundamental
adjustments in its economic development strategy.